Cola Wars Case Analysis

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Cola Wars Case Analysis

The article “Cola Wars Continue: Coke and Pepsi in the Twenty-First Century” is about the “love-hate” relationship between the two largest cola companies of America, as they fight with each other for shares of a $60 billion industry, while also fighting with the industry to increase and fuel growth for cola consumption. From 1975 to 1990 both companies achieved an average annual growth of about 10%, while consumption grew in the U.S. and worldwide, but a turn of events in the late 1990s threatened the companies with consumption of carbonated soft drinks (CSD) dropping for a consecutive two years and worldwide shipments were also slowing. The decline is thought to be from the consumer’s want for alternatives to CSD’s like sports drinks, bottled water, juices, teas, etc. The solution to this problem relies on both of the companies’ abilities to boost flagging domestic sales, venture into emerging international markets, broaden their brand portfolio for new streams of revenue and include non-carbonated beverages in their “big plan”.

When comparing this competitive rivalry to The Porter Five Forces of Competition Model, it’s easy to see that the competition was intense between the two companies because of two of the main forces: Substitutes and Competitors. Both companies were serving to meet similar needs and offer more value, but when the needs of customers changed and consumers wanted alternatives to CSD’s, the threat of substitutes was intense. Coca Cola and Pepsi sought out new CSD brands, adding over 10 major brands. Coca Cola went as far as changing their 99-year formula, but then retracted and stated its regular formula as its flagship brand due to bad customer feedback. Forming substitutes was also an attempt for both companies to “up” slow-growth percentages. There was only a .2% increase in 2000, which is in contrast with the 5%-7% annual growth in U.S. during the 1980s, so formulating CSD substitutes and bringing on new CSD...
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